GLD rose again to hit the first target of the 27.2 Fib extension = half Cup & Handle target. Because the option will expire in 2 days I seriously doubt we'll make it up to the 2nd target in time.
So I sold at the 1st target at 1.65, and profit of (1.65 - 1.15) *100=$50 per spread. Subtract the other spread that expired worthless: $50-$115=$-65 per position.
Not really very satisfying. Why didn't we make money even though price hit our 1st target? Timing. We were expecting the Cup & Handle pattern to work or fail, but it did neither. It formed a whole new rounded bottom pattern. Its just a weird pattern that caused us a long enough delay such that the 1st short term option expired.
Is there a lesson? Yes. I always ask myself when a trade completes, success or failure, what can I learn from this trade. The lesson here is I chose short term options for the higher Gamma and therefore higher profit, if the trade worked. I did not consider the possibility the Cup and Handle pattern would morph into a sloppy mess.
So going forward, I intend to give myself more time for a trade to work out, and sacrifice a higher Gamma and a higher cost of the options, by choosing a later expiration date.
If you're not familiar with option Gamma, its a 2nd derivative of Delta. That is, Delta is the rate of change of how much the option price changes in response to a change in the underlying security, and Gamma is the rate of change of Delta. So you could say Gamma is the acceleration of how much the option price changes in response to a change in the underlying security, or Gamma is the rate of change of the rate of change.
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